More than 33,000 Michigan residents could lose refunds by missing April 18 tax filing deadline

By
Gina Joseph, The Daily Tribune

Friday, April 7, 2017

The U.S. stands to collect nearly $34 million from more than 33,000 Michigan taxpayers entitled to income tax refunds three years ago but who have not filed their tax returns since.

Nationally, there are more than a million people with more than $1 billion in potential refunds the government stands to keep.

The estimated median refund for Michigan taxpayers is $763. Median means half the taxpayers will be losing a larger refund and half will be losing a smaller refund if they don’t file back tax returns.

In Michigan, the number of non-filers the Internal Revenue Service is trying to reach amounts to less than 1 percent of all state tax filers, but still represents a windfall for the government tax agency.

The IRS each year releases the number of non-filers entitled to refunds from three years previous, but doesn’t identify them.

There are a multitude of reasons why people don’t file, or stop filing, income tax returns, according to the Accounting Aid Society, which offers free tax assistance at various locations to residents of Oakland, Wayne, Macomb, and Livingston counties.

“Some taxpayers believe they will get a penalty if they miss filing a year, even if getting a refund, and so don’t file,” said Marshall Hunt, director of tax policy and advocacy for the Accounting Aid Society. “ As a general rule there aren’t penalties for not filing a refund return – only missing the opportunity to get the refund.

“Some taxpayers believe that once you reach a certain age or retire you don’t have to file anymore,” Hunt said. “That might be true in some cases but there might be refunds available from withholding or state credits. Some taxpayers know that their refunds will applied against debt such as past-due child support or other obligations so they don’t file.”

Some people simply procrastinate, said Rachelle Wood, a tax advisor with Block Advisors in Macomb County’s Shelby Township.

“I’m feeling it right now,” Wood said a few days ago. “We have two weeks left and it’s like, ‘whoosh’ everyone remembers it’s April.”

The filing deadline this year is April 18.

Some people actually don’t have to file tax returns.

“There are a lot of seniors who don’t have to file because of the way Michigan’s retirement income is figured,” Wood said.

Taxpayers born before 1946 for example do not pay taxes on their Social Security and other retirement benefits, and capital gains up to $10,767 for single filers and $21,534 for joint filers.

Similarly, Social Security for seniors born between 1946 and 1952 is exempt along with railroad pensions or any military and Michigan National Guard pensions.

What older taxpayers may not know is that they could be getting a refund because of what they’re paying in property taxes.

Wood, a tax preparer for more than 20 years, said she loves finding refunds for people.

“The IRS will not reach out to you if you have a refund coming,” Wood said. “It is your responsibility to file a report to get it.”

Brian Newman, who teaches accounting at Macomb Community College, said some young people have never filed tax returns before.

“I recently filed income tax for someone who had not filed in three years,” Newman said, a woman in her 20s. “In her case, there was no intent not to file. She just didn’t know that she needed to file. We had to go back and file three years-worth of returns. But her refunds added up to $3,000.”

Hunt, at the Accounting Aid Society, said one reason why people should file income tax returns is if they owe taxes. If someone owes taxes, there are penalties and interest charges for not filing. “It doesn’t get any better by waiting,” he said.

Steps To Filing

The Accounting Aid Society offers four types of services:

• Volunteer Income Tax Assistance, which is free tax and credit preparation and coaching for low- to middle-income households.

Free income tax and credit preparation and coaching for middle to low income households.

• Low Income Taxpayer Clinic, to help resolve disputes with the IRS and to assist victims of identity theft on federal tax matters.

• Financial Coaching and Financial Education, for groups and individuals for people who want to improve their personal financial management.

• Small Business Financial Services Training and coaching on taxation, record keeping, financial statements for small businesses, start-ups and entrepreneurs.

The Accounting Aid Society also has a couple suggested steps for non-filers to become tax return filers again:

• The first step is get records in order and obtain any missing information. The IRS can provide printouts of documents it has received, such as W-2s.

• File tax returns before the filing deadline to avoid possible penalties, or avoid lost refunds.